Rwanda Revenue Authority (RRA) has ordered businesses operating in residential buildings to start issuing Electronic Billing Machine (EBM) receipts. Owners of such residential properties have also been mandated to register for Value Added Tax (VAT).

The development comes after the tax body noticed that many business owners across the City of Kigali and elsewhere in the country were using residential properties for commercial purposes, although it was hard to confirm whether most of them do actually pay taxes.

RRA targets specifically the tourism and hospitality establishments, hospitals, pharmacies, offices, and shops operating in residential premises with the intention to encourage compliance with the law relating to the payment of VAT.

EBM usage became compulsory for all traders in 2020 and the government has been encouraging the issuance of EBM receipts to enhance transparency for businesses and facilitate accurate tax collection by providing reliable data to RRA.

There has been progress since EBM usage became mandatory. However, RRA analysis shows that there are still businesses that are non-compliant when it comes to EBM usage.

This means that consumers and traders still need to understand that issuing an electronic invoice is complying with the law, and going against this practice is punishable.

There are still challenges including some traders either lacking EBMs, not consistently issuing invoices, or failing to match invoices with sales which undermines business integrity as those purchases do not enter EBM inventory, making it impossible to issue electronic invoices.

On the other hand, VAT is a major source of revenue for the government. In turn, these revenues help to serve public good, including financing infrastructure activities such as roads, hospitals, schools, and airports, among others.

RRA collected Rwf605.5 billion in taxes and non-tax revenues from July to September of the fiscal year 2023/2024. This achievement represents 98.6 percent of the targeted collection of Rwf614.2 billion.

To hit the revenue targets and increase revenue to even higher levels, taxpayers particularly businesses and owners operating in residential areas must understand that compliance with EBM and VAT goes a long way to help achieve this.